The Tech Industry & Social Disruption

by Darwin Bond-Graham, September 18, 2013

Disruption was once a theory of social change that inspired the radical Left. In the 1970s scholars like Frances Fox Piven and Richard Cloward developed a disruptive theory of social movements based in particular on the history of the Welfare Rights Movement. In the 1960s African Americans and students, just to take two obvious examples, mobilized massive direct actions that disrupted the orderly operation of the economy and the state, creating crises that made change necessary. They literally disrupted American apartheid, and disrupted the draft, and movement of war materiel. As a result, social movements powered by the collective actions of millions of people transformed society, even if it was not always in the ways they intended.

Today disruption has become the zeitgeist of the tech industry, and therefore a buzzword animating the very epicenter of capitalism. This time the disrupters’ intentions are to generate profits by the billions. The major intellectual fashion of today is that tech — by tech I mostly mean companies that produce software platforms made potent by wireless networks and new capabilities in data processing — is going to disrupt the slow moving dinosaurs in every industry. The belief is that the disruptive tech rodents are coming to kill and feast on the bones of the sloth-like healthcare corporations, the lumbering banks, the sluggish real estate companies, and to throw the troglodyte governments into disarray. Victorious in a natural progression of predation toward extinction, the tech companies, with the egg yolk of the dinosaurs still smeared on their clever whiskers, will lead the survivors to new vistas of neoliberal wealth and power.

In the capital of the tech world, the two-poled California megalopolis of San Francisco and San Jose and all the suburbs crammed into the 50 miles in between, every programmer and engineer under the age of 40 is obsessed with being the next big disruptive force. San Francisco is host to the younger tech companies and many of the youthful tech workers. They are drawn to the city by their desire to live in a hip urban playground. San Francisco, their adopted home, has been made into a living laboratory for the disrupters. There are now more tech startups crowded into the downtown sky scrapers, South of Market warehouses, and Mid-Market blocks, than any other city in America. From all over the world baby-faced entrepreneurs are arriving to bunk in $3,000 a month apartments and spend their days furiously writing code toward launch.

Yesterday the unruly vandals of computerdom gathered in San Francisco’s SOMA neighborhood for Disrupt SF, a yearly conference. SOMA is a concrete slab of land south of the city’s financial district which over the past two decades has been built up with luxury apartments, and populated by web companies stuffed into old brick low-rises and converted garages. Once SOMA was considered unseemly. It stood in contrast to the waspy Financial District north of Market Street. Much of SOMA was built upon landfill. For decades after World War II SOMA was San Francisco’s haven for elderly hotel tenants, ex-sailors, dockworkers, white ethnics, Filipino immigrants, the gay community, and other social castaways who built a thriving community. Today SOMA’s square feet are among the most expensive in U.S. real estate.

Disrupt SF, probably the tech industry’s biggest startup conference, has easily filled one of San Francisco’s enormous conference venues. The city’s many conference halls are favorites of the tech industry. For years Apple has debuted their latest i-whatevers at the Yerba Buena Center, and Oracle convenes its big developer’s conference in the city’s Moscone Center. TechCrunch, an industry PR machine that hosts the Disrupt SFconference, moved to San Francisco three years ago, right into the SOMA neighborhood. Amazingly they cited the cheaper rent of the city compared to Palo Alto, but the migration of one of the tech industry’s major web publications was also due to an obvious need to be closer to the startup mania that has overwhelmed San Francisco.

Disrupt SF is like most big industry conferences. Attendees pay a lot to get in. Badges around necks, and bags slung awkwardly over their shoulders, attendees roam about the cavernous exhibition floor. But unlike many business gatherings the average age of the techies at Disrupt SF seems to be about 30. Youth, stupid and beautiful and naive youth empowered by its idiot savant mastery of technology, is everywhere in abundance. Every fresh out of college computer whiz believes in their idea with religious zeal. They see the world in problem sets, like the sets their engineering professors handed them, and they are ready to solve the equations, or debug the code. Fortune and fame awaits.

Many of the conference goers shy away from anything they feel to be “political.” If they share a political worldview, it’s a vague libertarianism grafted to a social liberalism, very much like what Richard Barbrook and Andy Cameron called the “Californian ideology.” They see all big institutions as pools of inefficiency in dire need of their fixes. Higher productivity is an assumed blessing. They style themselves as a bit rebellious and freedom loving.

At Disrupt SF sponsors’ brands are plastered about the exhibition space. A couple thousand feet above the pavilion a rented airplane (or is it a drone flown by a 20 year-old using an iPhone app?) is printing advertisements in the sky to promote a cloud computing firm. Giants like IBM and Chevy are front and center with ample floorspace. Chevy parked a hybrid car in the middle of the hall and is seeking app developers to hack its computer system. Other behemoth corporations like Intel and Samsung have smaller booths inserted among the tiny mammals. They’re hoping to attract developers to polish their big enterprise products and retail offerings.

The vendors hall is organized in long rows of little tables where companies promote themselves to strangers who flow through tapping their phones or gazing at any of the hundreds of flat screen displays glittering with maps and flashy videos. Symbols of sexism are visible here and there. One tech company CEO is walking around the pavilion posing as a boxing promoter, joined by a tall blond in short shorts — his “ring girl.” There are lots of men about everywhere, but also a good number of women, demonstrating that the tech industry is perhaps changing from a boys club into something more balanced.

There’s a Brazilian delegation of startups in one corner, and next to them are the Irish. The Brazilian tech firms are selling the same kinds of gizmos as the Americans. One company is showing off its software and video cameras that retailers install to monitor their shelves. The computer by itself can learn to recognize particular products from sight, and the computer watches patiently as shoppers remove items from the shelf. The company’s CEO tells me their system will help retailers keep their stores stocked optimally. By using heat maps that visualize which shelves are trafficked most heavily his computers can monetize product placement and shelving design. The computers seem to do most of the thinking.

A friendly member of the Irish delegation says his country is still pretty devastated by the global recession, but that the tech sector is booming in Dublin. His company develops software that is supposed to coordinate a company’s workforce better, and he says they’ve already sold it to Disney, Ebay, and the shoe and apparel brand Puma. Not quite a disruption, but probably very lucrative. What’s disrupting the Irish tech sector, he says, is a shortage of skilled labor. Tech companies flocked to Ireland in the 2000s for the Island’s labor force, but also very much for the near zero taxes many corporations like Google and Apple benefit from there.

Each one the hundreds of CEOs and CTOs in attendance — regardless of age and experience virtually everyone here is the “chief” or “founder” of something — eagerly hopes the next interested visitor will be the reporter who will feature them in Wired or the Wall Street Journal in a glowing article comparing them to an embryonic PayPal. They desperately dream a Sand Hill Road investor, up for the day from the little valleys of the San Mateo Peninsula where the silver-haired patriarchs of the tech industry abide, will walk up, shake their hand, and listen for a five minute pitch.

Of course most of the disruptive rodents will perish under the feet of the dinosaurs, and disappear into the maws of their hungry litter-mates, but the whole point of Disrupt SF is to celebrate the few startups that will make it. A select few go head-to-head in the “startup battlefield.” Participants are promised exposure, prestige, press, and other business mana from above. The battle, the unbridled competition between bootstrap companies, invokes a survival-of-the-fittest struggle to overcome. In reality it’s a somewhat under-whelming series of presentations by companies on stage as they light up their software and walk the audience through its disruptive potential.

Disruption, as the tech industry’s intellectuals conceive of it, is very Schumpeterian; constant innovation will destroy inefficient pools of capital, but set the stage for whole new levels of accumulation. Unlike Schumpeter’s original writings, and the literature on creative destruction based off his essential insights, the tech industry’s contemporary ideology of disruption includes a very partisan belief that they and they alone are the agents of innovation, and their singular industry, tech, will invade and burn and rebuild every other industrial sector, whole landscapes of the economy where real innovation doesn’t happen. Their ideas and software will determine which companies in agriculture, education, and energy rise to the top.

Many in tech also believe that their innovations are radically egalitarian, democratic, and empowering for the average person. One company selling software to the state of Massachusetts is creating transparency in how transfers, in the tax code and budget outlays, differentially affect households across income brackets. Another company wants to be the Facebook of local communities, connecting people on a geographic basis. Numerous startups are trying to find the next best way to create a mobile electronic payments application — the Holy Grail of a perfect credit card in the phone. The list goes on and one, hundreds of little companies trying to solve the world’s problems, make everything cheaper, more abundant, and immediate.

However, when it comes to their interactions with the large titans of industry, it’s not clear that the disrupters are really up to all that much destruction. Other sectors of the economy that are employing tech’s newest revolutions in cloud computing, wireless communications, big data, and geo-location, are just improving on capabilities they have already attained, at least in quality if not scale, and reinforcing their dominance over markets. WalMart, Ford, Coca-Cola, Levi’s, and Monsanto aren’t going to be disrupted by tech’s rodents. They’re going to become eager customers, or else buy them up and fold them into some segment of an existing corporate technology division. The profits for the Fortune 500 will continue to flow and grow. The dinosaurs are bulking up on the rodents. So far tech has tended to reinforce the power of the dominant corporations, while a few tech companies have become behemoths in their own right.

The celebrities of Disrupt SF are a sign that the real forces behind the tech industry aren’t as iconoclastic and democratic as they’re made out to be. The biggest name speakers are executives of multi-billion dollar corporations and private equity groups. The investors especially are a conservative clique; as many of them are Republicans as are Democrats, but regardless of their party affiliation their business is to capture value for their clients.

Well known technology focused private equity groups like Kleiner Perkins Caufield & Byers, Microsoft Ventures and Sequoia Capital loom over Disrupt SF. Even the Winklevoss twins, made famous as the dupes of Mark Zuckerberg in the film adaptation of Facebook’s founding The Social Network, are at Disrupt SF in search of acquisitions, or maybe just to be celebrated. Their firm, humbly named Winklevoss Capital, is one of the investors behind the virtual currency Bitcoin. (Of course the Winklevoss brothers’ investment in Bitcoin was in actual dollars, as they expect their returns to be.) Private equity executives sit on the panels of judges that weed out the weak from the strong in the startup battles at Disrupt SF. The managing partners of the biggest banks speak frequently throughout the three day conference. Their gravitas is obvious and constantly deferred to. Their money is literally dominant. The event wouldn’t happen without their interest.

If the money behind the startups is actually big, and if they’re not disrupting the titans of industry, what then are the techies really destroying? Where’s the disruption actually happening?

It’s fitting that the tech industry’s big startup conference is in San Francisco this year. Over the past five years San Francisco’s communities and most competitive industries have been profoundly disrupted by the tech industry. Taxi cab companies have taken to staging monthly protests against the complete lack of regulation of the city’s burgeoning ride-share companies, essentially cabs, but driven by private drivers, lacking commercial insurance, and untaxed by the city or airport. Ride-sharing is extremely profitable for the few companies running the major app software that links drivers with passengers. The city’s hotel industry, as well as some elected officials, are no fans of Airbnb and similar services that create unregulated and untaxed hotel rooms in private residences, driving up rental prices in the process.

Cabs and hotels are just two examples of how tech is disrupting smaller, previously competitive, regulated, and taxed sectors of the economy. California’s educational system has been enduring a chronic and extremely disruptive crisis for over a decade now thanks mostly to massive tax cuts benefiting real estate owners and the wealthy. Tech companies developing MOOCs, so-called massive open online courses, are keen to profit off the unraveling of California’s educational system. At disrupt SF California’s lieutenant governor Gavin Newsom shared a stage with, and praised Sebastian Thrun, the founder of Udacity, one of the large MOOC developers. MOOCs have been criticized by many as engendering a more unequal education system, but their promotors claim the opposite.

In the social realm the tech companies have turned San Francisco into a dormitory community for their workers. Thousands of Apple, Google, Ebay, and other tech company employees are shuttled daily down to Santa Clara in massive luxury buses. To many, the much-maligned tech buses are a metaphor for how tech makes money; technology companies mooch off of publicly funded infrastructure and publicly funded research and social cooperation. Their single most important innovation involves the strategic deployment of intellectual property laws to monopolize a technique of harvesting value from these public goods. The bigger tech companies have also perfected the art oftransfer pricing, thereby minimizing their taxes and maximizing their profits.

Facebook and Google are the masters of this model. Both offer “free” services, but through clever algorithms and vast troves of data they claim as their property, they create captive spaces in which to spray advertising to the tune of billions in revenue every year. They sell data to the highest bidders. Their major disruptions seem to be dissolution of privacy and avoidance of federal taxation.

Darwin Bond-Graham is a contributing editor to CounterPunch and a sociologist/author who lives and works in Oakland. His essay on economic inequality in the “new” California economy appears in the July issue of CounterPunch magazine. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion.